← Guides / UK Investment & Savings

Share Dealing & Trading Tax

Buying and selling shares outside a tax wrapper such as an ISA or SIPP has significant tax implications in the UK. The two main taxes that apply to share dealing are Capital Gains Tax (CGT) on profits from disposals and Stamp Duty Reserve Tax (SDRT) on purchases. For the 2025/26 tax year, the CGT annual exempt amount is £3,000, and gains above this are taxed at 10% (basic rate) or 20% (higher rate). Share trading is reported on the Capital Gains summary pages (SA108) of your Self Assessment return. The tax year runs from 6 April to 5 April, and you must report chargeable disposals in the year they occur.

Bed and Breakfasting Rules

HMRC's bed and breakfasting rules prevent you from selling shares to realise a gain or loss and then buying them back immediately (or shortly thereafter) to create a tax advantage. Under the share identification rules introduced by FA 2012 (Finance Act 2012), if you sell shares and buy back the same shares within 30 days, the disposal is matched against the repurchase — not against your main Section 104 pool of holdings. This means the gain or loss on the disposal is deferred until you eventually sell the repurchased shares outside the 30-day window. The same rule applies if you sell shares and your spouse or civil partner buys them within 30 days. These rules apply to shares in the same company, not to shares in different companies or ETFs tracking the same index.

Share Identification Rules (FA 2012)

The share identification rules determine which shares you are deemed to have sold when you dispose of only part of your holding. The order of disposal matching under FA 2012 is as follows: first, shares acquired on the same day as the disposal; second, shares acquired within the 30 days following the disposal (the bed and breakfasting rule); third, shares from the Section 104 pool (the average cost of all shares held). There is also a separate "1982 holding" pool for shares held before 31 March 1982 (inception of CGT). These rules apply to shares in the same class of the same company. Understanding the identification rules is critical for accurate CGT reporting and for planning disposals to minimise tax.

Section 104 Pool

The Section 104 pool (named after section 104 of the Taxation of Chargeable Gains Act 1992) is a single pool that aggregates all shares of the same class in the same company acquired on or after 6 April 1998. Each time you buy more shares, the pool cost and number of shares are averaged. Each time you sell, the cost attributed to the disposal is the average cost per share in the pool at that time. The pool also tracks indexation allowance (for corporate shareholders) and any prior adjustments for stock splits, rights issues, and bonus issues. For individual investors, indexation allowance was frozen at December 2017 values, so it is only relevant for shares held before that date (and only for CGT purposes if the shares were held at that date). Keeping accurate records of your Section 104 pool is essential for correct CGT computation.

Reporting on SA108

Capital gains from share dealing are reported on the SA108 supplementary pages (Capital Gains Summary) of your Self Assessment tax return. You need to report: the date of disposal, the number of shares, the disposal proceeds, the allowable costs (acquisition cost and fees), and the gain or loss. If you have many disposals in a tax year, you can aggregate them by asset type — but you must still show total proceeds, total costs, and total gains/losses. An "asset" in this context is each class of share in each company. If your total gains do not exceed the annual exempt amount (£3,000), you only need to report disposals if the total proceeds exceed £50,000 (four times the exempt amount) — otherwise, you do not need to report them at all (though you must still keep records). If you have losses to carry forward, you must report these to HMRC within four years of the end of the tax year.

Stamp Duty Reserve Tax

When you buy UK shares electronically, you pay Stamp Duty Reserve Tax (SDRT) at 0.5% of the purchase price. If you buy shares through a stock transfer form (paper-based), you pay Stamp Duty instead. SDRT is rounded up to the nearest penny and is collected by your broker or platform on your behalf. It is not recoverable and forms part of the allowable cost for CGT purposes. Shares listed on AIM (Alternative Investment Market) and ISDX (formerly PLUS Markets) are generally exempt from SDRT. Some foreign shares may be subject to equivalent transaction taxes in their home jurisdiction. SDRT does not apply to gilts, bonds, ETFs (most UK-domiciled ETFs), or shares traded on growth markets like AIM.

Trading vs Investing

HMRC distinguishes between share trading (a trade) and share investing (a capital asset). If you trade shares frequently with the intention of making a profit, you may be treated as a trader rather than an investor. The distinction matters because: traders pay Income Tax (not CGT) on their profits; they are subject to Class 4 National Insurance contributions; they can claim trading losses against other income; and they cannot use the CGT annual exempt amount. HMRC considers factors including frequency of trading, level of organisation, the nature of the assets, and whether the activity is carried on commercially for profit. Most private investors who buy and sell shares occasionally are treated as investors subject to CGT. Active day traders may be treated as traders — this is a fact-sensitive determination.